Increasing Louisiana state taxes … uh, fees

Jeremy Alford on why remaining ‘revenue neutral’ is all a matter of semantics

Call it a tax or a fee, a penalty or a fine. By any name, increasing one or more of those things means individuals and businesses will pay more to the state next year. They're all on the table when lawmakers convene April 13 for what promises to be a legal and political vortex that blurs all lines, and quite possibly could suck hundreds of millions of dollars in additional payments from you and yours.

Creative wordplay has always been a hallmark of Louisiana politics. This year it's an art form, and definitions are important:

• A tax is a charge levied by government on goods and services in order to raise money.

• A fee is a similar charge, but in Louisiana fees can be imposed only to the extent that they recoup the cost of what actually is provided to the payer.

•Fines and penalties are monetary punishments for legal or policy infractions.

Gov. Bobby Jindal has said he will not approve any new taxes or tax increases this session, unless they are offset by reductions elsewhere in the budget, thus making them "revenue neutral." The governor is willing to approve fee increases, as long as they fit the definition above and aren't taxes in disguise. He has a record of supporting fines and penalties, too. They all will be needed — along with cuts — to fill a $1.6 billion budget hole.

Jindal's anti-tax philosophy can lead to some circuitous turns of logic, as evidenced by his original fee-tax-refund plan for higher education. On Feb. 27, the administration proposed up to $100 million in new "excellence fees" to be charged by public universities and colleges. Those fees, which were to be paid by students or their parents, would have been offset by a new tax refund for those who pay the fees. The refunds, in turn, would have been bankrolled by an increase in the state's cigarette tax.

The plan proved to be very fluid. Five days after it initially was presented to lawmakers, and in the wake of harsh criticism, the administration told higher education officials that parents and students would not be forced to pay the proposed fees out of pocket after all. Instead, the money would come from a fund, possibly supported by a cigarette tax or another revenue source, and given to colleges and universities. Even the phrase "excellence fees" was dropped; now it's the SAVE program, or "State Adjustment for Valuable Education." It's still unknown exactly how the related tax credits will play out, but for now the plan is to give them to colleges and universities, rather than parents and students.

In addition to the higher-ed fees and the cigarette tax, at least eight state departments and agencies have proposed $74 million worth of new and increased fees. The administration argues that inflation and growth have slowly jacked up the cost of doing business, and thus the increases are needed to keep pace.

If lawmakers go along with Jindal's plan, businesses and individuals will be asked to pay more for tax installment agreements, vehicle title certificates, medical window tints, storage facility licenses, ferry toll fares, billboard permits, environmental document processing, pipeline fees and penalties on late tax payments, among other government-regulated services and functions.

There likely will be many more ideas brought to the table, as budget shortfalls need to be filled across state government. New fines and penalties will crop up as well, such as legislation already introduced to double littering fines in order to pay down law enforcement retirement debts.

Then there are indirect tax increases, which the Louisiana Association of Business and Industry (LABI) is warning about, in relation to the administration's plan to repeal the refundable part of the inventory tax credit. LABI believes the move would increase the money more than 10,000 businesses spend on tax payments to local governments — somewhere between $377 million and $462 million. Backing up Team Jindal is Grover Norquist, whose anti-tax Americans for Tax Reform has deemed the governor's plan not a tax.

Still, the inventory tax credit idea and proposed fee increases will keep the business lobby very busy this session. LABI president Stephen Waguespack wasted no time calling the inventory tax credit change a tax hike. He said repealing the credit and leaving the inventory tax in place would "throw sand in the gears of our growing economy ... and lower the number of jobs in Louisiana." He added, "Repealing the inventory tax credit is bad policy and a tax increase we simply cannot afford."

If lawmakers want to circumvent Jindal's opposition to tax increases, they have several options. They could pass a special veto-proof resolution to temporarily suspend tax exemptions for one year. They also could override Jindal's inevitable veto of any tax hikes, but overrides are very rare. Finally, they could get creative — like passing a multi-year tax package that offers revenue from tax increases only in the first few years, and then presents the balancing mechanisms to make them neutral in future years, when, one hopes, state government will be in better shape.

The real answer, though, would be a structural change to the budgeting process and to Louisiana's tax code to address a structural problem. That likely will have to wait until the next governor is sworn in. For now, the administration and lawmakers need political will — because there is not enough money unless they increase taxes, fees, fines or penalties. Rejecting out of hand any revenue measure, by any name, would be irresponsible. Playing word games with the same would be dishonest.

Such is the vortex lawmakers will enter on April 13 — a mere five months before most of them have to qualify for re-election.